Wisdom is massively under-rated in our data-driven society. Data, information, even knowledge can be learned. Wisdom however has to be absorbed. Wisdom is the hard-earned distillation of decades of life experience. So in this summary today I can only scrape the surface with a precis of information and knowledge. As always I just pick out a few points here – it’s a wide-ranging conversation. To absorb the wisdom you will need to listen and reflect.

Michael is a lifetime entrepreneur, He is a fellow of the Royal Society and he is currently founder and MD of Third Sector Finance which adapts Financial Services products to meet the needs of social enterprises in the UK. I met him at a digital currency day as he is both an investor in digital currencies as well as working on improving the blockchain (this distributed ledger that was discussed in LFP003). He is a non-executive director of Gnaratas a company in the renewable alternative fuel sector in Swaziland. In the second Gulf war he co-founded a company that became very active in supplying satellite comms businesses to the non-military allied forces.

I could go on but I think you get the drift. In a world where words get devalued bigtime Michael is a Real Entrepreneur with a capital R, capital E.

His seminal experience was starting a painting and decorating business in the Isle of Man. He learned not only “pure capitalism” – employ good people, pay them x, bill x + y – but also from the millionaires whose gardens they also maintained. Most of them were nice (a surprise) and all of them kept it very simple. K.I.S.S was an everlasting lesson.

One of his core experiences which may well help shed light on the current fintech boom/bubble is none of the above incarnations. In the dot-com bubble. Michael was an active investor in a whole bunch of dot-com companies – most, but not all, of which went through the roof and then through the floor on the way down. Taking a temporary early retirement in France he had plenty of time to reflect on what differentiated the succesful investments from the unsuccessful ones.

Lessons from Dot Com Boom Investing

What companies focus on they tend to do well. But it’s the context, the 360 degree, the surround, the interactions with broader environment that determined success or failure.

Need to have a team surrounding one to give this breadth. In London Fintech right now there is good know-how around how to transform an idea into a product but few who can transform a product into a business. A lack of the right people to help with this latter stage.

The investments which did best had a lot of domain knowledge and expertise in the team. The best returns came from where it was effectively a management buyout – folks who know the business, know the market, know the problems. We discuss the need (and frequent absence in many Fintechs) for domain expertise in the majority of Fintech. The mainstream media tends to focus on retail FS only but this is small subset.

At the opposite end the worst ones had minimal experience and there was no real demand for the product (they had fooled themselves and others that there was). The most common mistake is convincing yourself there is a market when there isn’t. Test test test is Michael’s main take-away. “Validated need” Marcelo Bravo.

Avoids early stage VC – “a very difficult area”.

This led on to a conversation about Incubators/accelerators. A study of them in the US shows very few have had positive returns. In London right now there is an underappreciation of the need for Financial Services experience which is vital in anything other than the simplest retail banking (which is a small part of overall FS). Darwinian evolution will weed out the weakest ones. On the other hand there is immense value in contacts, in the right kind of environment of similar folks in similar enterprises.

The 3 month rule – if you are getting nowhere over that timescale – in general best to move on.

The importance of phones calls or meetings rather than email/social media – people make the world go round.

Anyway plenty more content in the show including a great anecdote about how to win contracts in the Iraq war … a great story of how a real entrepreneur, like a Lionel Messi, sees a gap and is straight through it and before you can blink the ball is in the net. Albeit in this case lots of balls in the net 😀

Michael ends with his feeling that there is a revolutionary feeling out there, profound change is taking place. Always hard to see the future but in terms of the dot-com boom one of the most valuable after-effects is the persistence of the unglamorous end of things – cable, broadband, etc. In a similar way when the froth dies down on Fintech it may well be the “infrastructural” aspects such as the blockchain which have the greatest longevity above and beyond the more glamorous, shiny things.

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